Banking Process And Functions Quiz! Exam

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Banking Process And Functions Quiz! Exam - Quiz

Banking means accepting, securing, and controlling the finances of individuals and enterprises. A bank is a financial institution that is authorized to collect deposits and offer loans. They provide various financial loans, offers, and schemes. But how much do you know about banking? This quiz has been designed to test your knowledge about the Banking Process and Functions.


Questions and Answers
  • 1. 

    You fill this out when you open a checking account as an anti-fraud precaution.

    • A.

      Register

    • B.

      Transaction protection

    • C.

      Signature Card

    • D.

      Overdraft transaction

    Correct Answer
    C. Signature Card
    Explanation
    When opening a checking account, one of the documents you typically fill out is a signature card. This card contains your signature, which is used as a reference for verifying your identity when conducting transactions. It serves as an anti-fraud precaution because it allows the bank to compare the signature on checks and other documents with the one on file. This helps prevent unauthorized individuals from accessing your account and protects against fraudulent activity.

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  • 2. 

    What do banks do with the cash we deposit into our accounts?

    • A.

      They leave it in boxes labeled with our names.

    • B.

      They invest it in order to make themselves money.

    • C.

      They pass it on to government offices for safekeeping.

    Correct Answer
    B. They invest it in order to make themselves money.
    Explanation
    Banks invest the cash we deposit into our accounts in order to generate profits for themselves. By investing in various financial instruments such as stocks, bonds, and loans, banks can earn interest and returns on these investments. This allows them to make money from the funds they hold, while also providing them with the ability to lend money to borrowers and offer other financial services.

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  • 3. 

    Instructions to the bank to shifts funds from your account to that of the person or firm whose name is written in the “Pay to the Order of” line.

    • A.

      Checks

    • B.

      Fiat Money

    • C.

      Commodity Money

    Correct Answer
    A. Checks
    Explanation
    Checks are a form of payment that allows the account holder to transfer funds from their own account to the account of another person or firm. The person or firm's name is written on the "Pay to the Order of" line, indicating that the funds should be shifted to their account. Checks are a convenient and widely accepted method of payment, providing a secure and traceable way to transfer money without the need for physical currency.

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  • 4. 

    How are banks good for the economy?

    • A.

      They hold money instead of people keeping it stuffed under their mattresses.

    • B.

      They generate money by providing loans, and this causes a healthy economy.

    • C.

      They mint new money all the time.

    Correct Answer
    B. They generate money by providing loans, and this causes a healthy economy.
    Explanation
    Banks are good for the economy because they generate money by providing loans. This is beneficial for the economy as it promotes economic growth and activity. When banks provide loans to individuals and businesses, it allows them to invest in various ventures, expand their operations, and create jobs. This increased economic activity stimulates the overall economy and leads to a healthier financial system. Additionally, banks play a crucial role in intermediating between savers and borrowers, channeling funds from those who have excess savings to those who need capital for productive purposes.

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  • 5. 

    Which body determines the amount that banks can lend?

    • A.

      The Senate

    • B.

      The U.S. Treasury

    • C.

      The Federal Reserve

    Correct Answer
    C. The Federal Reserve
    Explanation
    The Federal Reserve is responsible for determining the amount that banks can lend. As the central banking system of the United States, the Federal Reserve sets monetary policy and regulates the banking industry. Through its control over interest rates and reserve requirements, the Federal Reserve influences the amount of money that banks can lend to promote economic stability and control inflation. This makes the Federal Reserve the correct answer to the question.

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  • 6. 

    What does "a run on the bank" refer to?

    • A.

      When everyone wants their money back from the bank at the same time

    • B.

      When everyone runs to deposit their checks at the same time in the same bank

    • C.

      When bank shareholders converge on the bank in a fast sprint

    Correct Answer
    A. When everyone wants their money back from the bank at the same time
    Explanation
    A "run on the bank" refers to a situation where there is a sudden rush by depositors to withdraw their money from a bank, usually due to concerns about the bank's solvency or stability. This can be triggered by rumors, financial instability, or loss of confidence in the bank. When everyone wants their money back from the bank at the same time, it can lead to a liquidity crisis for the bank, as it may not have enough cash on hand to meet all the withdrawal requests.

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  • 7. 

    If the bank is insured, then your money will be safeguarded. Who does it need to be insured by?

    • A.

      The Federal Deposit Insurance Corporation (FDIC)

    • B.

      Nationwide Mutual Insurance Company

    • C.

      American International Group (AIG)

    Correct Answer
    A. The Federal Deposit Insurance Corporation (FDIC)
    Explanation
    The correct answer is the Federal Deposit Insurance Corporation (FDIC). The FDIC is a government agency that provides deposit insurance to banks in the United States. This means that if a bank fails, the FDIC will step in and reimburse depositors for their lost funds, up to a certain limit. Insuring the bank with the FDIC ensures that your money will be protected in the event of a bank failure.

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  • 8. 

    Why were commercial banks initially set up?

    • A.

      To solve the problems of the private banking system

    • B.

      To provide an alternative banking system to the earlier kind of banks

    • C.

      To offer banking services for businesses

    Correct Answer
    C. To offer banking services for businesses
    Explanation
    Commercial banks were initially set up to offer banking services for businesses. These banks were established to cater specifically to the financial needs of businesses, providing them with various services such as loans, deposits, and payment processing. By offering specialized services for businesses, commercial banks aimed to support economic development and facilitate the growth of industries.

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  • 9. 

    What market were savings banks intended to serve?

    • A.

      Low-income workers

    • B.

      High-income earners

    • C.

      Everybody, as long as they had some form of income

    Correct Answer
    A. Low-income workers
    Explanation
    Savings banks were intended to serve low-income workers. These banks were established with the purpose of providing financial services and opportunities for individuals with limited income. They aimed to help low-income workers save money, access loans, and manage their finances effectively. By focusing on this specific market segment, savings banks aimed to address the financial needs and challenges faced by low-income workers and promote financial inclusion for this group.

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  • 10. 

    In what way are banks like any other business?

    • A.

      They hire salaried workers and pay taxes.

    • B.

      They're out to make money, as businesses, only the product they "sell" is money.

    • C.

      They have open hours like other businesses and are closed on weekends.

    Correct Answer
    B. They're out to make money, as businesses, only the product they "sell" is money.
    Explanation
    Banks are like any other business because they are focused on making a profit. However, their product is money itself. Just like other businesses, banks aim to generate revenue and maximize their profits. They offer various financial services and products to attract customers and generate income through interest rates, fees, and investments. The primary goal of banks, like any other business, is to make money and ensure their financial success.

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